Payroll Tax Pinch

Packer blames Walmart’s sales decline on the expiration of the payroll tax cut:

Last week, Bloomberg News reported that Walmart’s sales in the first days of February were abysmal. In internal e-mails that were leaked, one corporate vice-president described the situation as “a total disaster,” while another asked, “Where are all the customers? And where’s their money?”

The executives answered their own question. Their customers’ money—some of it—has gone back to the government, in the form of the two-per-cent increase in payroll taxes that took effect with the new budget deal on New Year’s Day. That deal supposedly allowed the economy to avoid going over the “fiscal cliff,” and its aversion was a source of much relief in Washington and on Wall Street. But there turned out to be, if not a cliff, at least a gulch still embedded in the deal. It’s amazing how little attention the payroll-tax increase got at the time—maybe because so few of the players and observers involved could imagine how much difference fifteen dollars out of the weekly paycheck of someone earning forty thousand dollars a year could make.